After Bulgaria, Romania too signed an agreement with the German defence company to build a state-of-the-art gunpowder factory. The European Union is pouring billions of euros into Bulgaria and Romania to resurrect their Cold War-era munitions expertise, modernising Soviet-vintage factories for 21st-century warfare.
At the forefront is German defence titan Rheinmetall AG, which is spearheading multibillion-euro projects to build state-of-the-art facilities amid a continent-wide scramble to address acute ammunition shortages triggered by Russia’s 2022 invasion of Ukraine.
New plants in Romania and Bulgaria
Rheinmetall and Romanian state-owned Romarm subsidiary Pirochim Victoria signed on 3 November a joint venture agreement in Bucharest to construct a gunpowder factory in Victoria, Brașov County.
German factory holds a 51% stake in the new entity, Rheinmetall Victoria SA, with Pirochim Victoria owning 49%. The project entails an investment exceeding €500 million, with production slated to begin in 2028.
The facility will produce propellant powder, modular propellant charges, and energy precursors like nitrocellulose. Annual capacity is projected at 300,000 modular charges (requiring ~750 tonnes of powder) plus an additional 200 tonnes of powder for local Romanian demand. It is expected to create around 700 jobs.
“This new production facility in Romania is another step toward our goal of achieving an annual production capacity of 20,000 tonnes of propellant powder by 2030,” said Rheinmetall CEO Armin Papperger. “Propellant powder remains a strategic bottleneck in the defense industry.”
The deal mirrors one signed on 28 October between Rheinmetall and Bulgarian state-owned VMZ Sopot. That joint venture will build a plant for gunpowder, 155mm NATO-standard artillery shells, and modular charging systems, with a €1 billion investment. Operations could start in just 14 months, producing up to 100,000 shells annually – many for export. The Bulgarian project will create over 1,000 jobs.
“Europe and NATO need millions of such shells,” Papperger noted.
Both nations are tapping the EU’s Security Action for Europe (SAFE) facility for low-cost loans totaling over €20 billion to fund defence upgrades without ballooning deficits. Bulgaria, which supplied a third of Ukraine’s early-war weapons according to European Commission President Ursula von der Leyen, now boasts the EU’s highest defense industry revenue as a share of GDP.
Romania, sharing a 650km border with Ukraine and frequently reporting Russian drone incursions, gains strategic self-sufficiency in gunpowder production while anchoring Rheinmetall’s expansion along NATO’s eastern flank.
Since Russia launched its full invasion of Ukraine, Romania has played an increasingly prominent role in NATO. It has donated a Patriot missile system to Ukraine and opened an international training hub for F-16 jet pilots from allied countries, including Ukraine.
Expansion in Hungary
Rheinmetall is also deepening roots in Hungary. At a ceremony in Zalaegerszeg in October, Rheinmetall Hungary Zrt. announced a €1.4 million investment – backed by the Hungarian Investment Promotion Agency, to expand development and engineering for military vehicles like the Lynx KF41 and Panther KF51. This will add 80 high-skilled jobs and elevate Hungary’s role in Rheinmetall’s global network.
“This will enable us to increase Hungary’s contribution to the latest developments in defence technology,” said Paul Walf, CEO of Rheinmetall Hungary Zrt. Foreign Minister Péter Szíjjártó called it a milestone in the ‘Zrínyi 2026’ modernization program.
Broader European rearmament push
These initiatives align with a surge in continental defence spending. Artillery shell production is now six times higher than two years ago. Germany, ending decades of underinvestment, has loosened debt rules to borrow billions for military gear. Chancellor Friedrich Merz vows to forge Europe’s “strongest conventional army,” with spending projected to hit €162 billion by 2029 – triple pre-war levels.
Rheinmetall inaugurated in August Europe’s largest munitions plant in Unterlüß, Germany, spanning 30,000 square meters. By 2027, it will churn out 350,000 artillery shells yearly, supporting an €8.5 billion German government order. NATO Secretary-General Mark Rutte hailed it as “absolutely crucial” for deterring Russia and China while aiding Ukraine.
German Defence Minister Boris Pistorius emphasized: “The military only works as well as the country behind it. We need to convert spending promises into concrete capabilities.”
Germany’s cabinet also approved a draft law boosting recruitment, with provisions for compulsory service if volunteers fall short, aiming to grow the Bundeswehr from 182,000 to 260,000 troops.
Market boom
Investors have propelled Rheinmetall’s Frankfurt-listed shares from under €100 pre-2022 to a peak near €1,900 in May 2025.
The rally accelerated after Russia’s invasion, Germany’s “turning point” policy under Olaf Scholz, and ongoing Ukraine conflict. U.S. President Donald Trump’s reelection and pressure for Europe to hike NATO spending to 5% of GDP have further fueled optimism, pouring taxpayer funds into firms like Rheinmetall, even amid uncertainty over timelines.
With Trump urging greater European self-reliance, such investments signal a sustained rearmament wave, transforming Eastern Europe’s rusting Soviet relics into NATO’s frontline arsenal.
